Theory Of Games And Economic Behavior - 2470 Words

Abstract In the year 1944, with John Von Neumann and Oskar Morgenstern publishing their paper on Theory of Games and Economic Behavior, foundations of Game Theory was laid. This paper is an attempt at condensing the fundamentals required to help decision-making at early stages of Project Procurement. With the advent in implementation of Game Theory in real world, new theories have emerged with Game Theory as their stepping stone. Simple yet important concept such as Nash Equilibrium, Payoffs will be discussed to give the reader and idea they can improve and customize upon according to their scenario. One strong recommended reading is a great introductory book on the topic, Game Theory: A†¦show more content†¦It is important that we understand why its creator felt this way, according to them the reason for this is simply that economics is far too difficult a science to permit its construction rapidly, especially in view of the very limited knowledge and imperfect description of the fa cts with which economists are dealing. Only those who fail to appreciate this condition are likely to attempt the construction of universal systems. The â€Å"Game† doesn’t always equate to the procedure that results in winning or loosing (which can be the case many a times). Here the connotation is merely utilized to provide a sense of structure involving strategies and plans to the whole process. As seen in a general Game, there are players and payoffs. Players have their strategies for particular situations, which may or may not depend on the other players’ moves. One interesting nature of game theory is seen when deciding moves using predefined strategies; our moves can be independent of those of the opponent’s, however, results occurring due to the combination moves are totally interdependent. This can be confusing but with understanding this underlining concept of game theory comes into light easily. This phenomenon is known as Strategic Interdependency. Simply described as: What I do affect your outcome, what you do affects my outcome. To understand such subtle complexities, one must be familiar with the knowledge required about